update Telstra said today it will oppose the passage of the government's Bill which would allow it to force separation on the big telecommunications company.

David Thodey, not so toothless, it seems(Credit: Telstra)

In its submission to the Senate Standing Committee looking into
the proposed legislation amendments, Telstra said the new
legislation would stop Australia achieving the National Broadband
Network (NBN), reduce competition, harm consumers, not necessarily result
in industry reform and potentially destroy value for the 1.4
million Australian shareholders who purchased Telstra shares from
the government.

"Therefore, Telstra has no choice but to oppose the passage of
the Bill in its current form," the telco said. "It is
unworkable."

Why Telstra didn't want the Bill
It was not only unworkable, but
unnecessary, according to the telco, which denied the market wasn't
working, and vehemently denied that, if it were so, it was at the heart of the trouble.

Telstra said it didn't like either of the alternatives offered
to it in the central part of the Bill; to voluntarily structurally
separate or be forced to a functional separation.

Functional separation disrupted network and product innovation
for years, the telco said, pointing experiences from the UK and New Zealand,
and said structural separation implemented in the US had
largely been rolled back. Both would divert resources from the NBN, it believed.

Instead, it suggested remodelling its operational support systems
to operate in a customer-agnostic fashion, with the wholesale and
retail business unit "plugging in" at the same level and
functionality, ostensibly giving wholesale customers the ability to
compete with its own retail facing units.

The telco was not better pleased with other components of the
Bill, such as those that could deny Telstra access to spectrum. It
would gain nothing for the NBN while damaging the market, consumers
and Telstra employees, it said.

"Given that the NBN delivers the
government's preferred industry structure and that wireless is not a
regulated service, there is simply no policy rationale for such an
exclusion," Telstra said.

Forcing Telstra to divest Foxtel and its hybrid fibre-coaxial
cable would also serve no public interest, the telco believed.
There was a competitor's network in the case of the HFC cable, and as for
Foxtel, media heavies such as News Corporation and Consolidated
Media Holdings would likely snap it up to the detriment of
Australian consumers.

The changes to the access regime didn't confine the way the
Regulator, the Australian Competition and Consumer Commission,
could use its powers enough and enabled it to ditch
procedural fairness, Telstra said — creating regulatory uncertainty
as opposed to ending it.

The Bill was wrong
Telstra then pointed out what it considered to be factual errors
in the Bill. It said its level of integration wasn't unusual,
claiming that "virtually every major incumbent telecommunications
carrier in the world is vertically integrated". Even its horizontal
integration wasn't strange, it said, naming examples such as
Deutsche Telekom and AT&T.

Neither was the level of competition insufficient or
ineffective, it claimed, talking about the number of its competitors,
listing those involved in backhaul. It also implied that separation
had been more global flop than global trend, saying that only a
handful of OECD countries had implemented functional separation and
a number of European regulators had spoken out on it.

The Bill had also said that Telstra's retail market share was on the
rise. Au contraire, the telco said, flourishing statistics for
2008/2009 which showed it had lost retail market share.

Last of all, Telstra denied it was the only one to benefit from
regulatory arrangements, saying that competitors had benefited from
the ACCC's decisions over the years.

At least change itFor the case that the government did decide to continue with its
plans, Telstra put forward a number of changes to the Bill to make it
more palatable for its board, management and shareholders.

The telco wanted the parts of the Bill dealing with its voluntary
structural separation and loss of Foxtel deleted completely.

The telco said the Bill should also be changed to say that functional separation
must not:

Be unduly burdensome and degrade Telstra's retail or
wholesale service quality

Impede Telstra's ability to compete fairly

Force Telstra to physically separate information systems or
networks

Stop network and wholesale using common information and
network operations systems directly through equivalent interfaces

Stop Telstra from creating internal network units to provide
in-sourcing of services at arm's length to the retail business unit
and network/wholesale business unit

Stop Telstra from using common
HR, legal, technology and network planning services

Telstra also wanted Minister Conroy's discretion curtailed on certain
matters and said that the spectrum section of the Bill had to be deleted
entirely. It wanted the legislation to include rules governing the
ACCC's conduct and allowing the review of the ACCC's decisions, as
well as asking for changes to the parts touching the universal
service obligation.

Customer service guarantees had to add a
requirement of reasonableness, the telco said, and wholesale
providers shouldn't be measured by performance standards or
benchmarks because they didn't have control of external systems to interface with.

Telstra also asked that if the bill were to go ahead, that the Senate delay debate on it until after Telstra had finished its discussions with the government over the NBN and the NBN implementation study had been completed.